Anna Bond Hannah Price Tom Ford June 22 2022 Diversity monitoring: what to collect and how to comply with the law Lewis Silkin LLP | Employment & Immigration - United Kingdom Anna Bond, Hannah Price, Tom Ford Employment & Immigration BackgroundWhat categories of diversity data should employers collect?Data protection, anonymisation and lawful useWhen should employers carry out diversity monitoring?Adopting global approach to diversity monitoringCommentTo improve diversity in the workforce, it needs to be measured, which entails collecting and monitoring data. But what questions should employees be asked about their individual characteristics and how can that information be handled lawfully? This article takes an in-depth look at these questions.BackgroundMany employers are increasingly focused on improving the diversity of their workforce. This has been driven by a number of factors; self-reflection prompted by the Black Lives Matter movement has led many employers to acknowledge that they could and should be doing more to promote diversity within their organisations. Legislative requirements and pressure from stakeholders are also increasing. For instance, companies are regularly expected to comment on their diversity profiles as part of requests for proposals, and the Financial Conduct Authority has recently introduced new requirements on listed companies to disclose against gender and ethnicity targets.(1)But to understand the extent of a perceived lack of diversity and to identify progress in addressing this, it is necessary for employers to collect data on the characteristics of their workforce. While there is no legal requirement to undertake diversity monitoring, the Equality and Human Rights Commission (EHRC) Statutory Code of Practice recommends that all employers do so.There are both practical and legal challenges for employers here, however. What data should employers collect and what terminology should they use? When should employers carry out monitoring and how do they balance data privacy considerations against the need to address the diversity imbalances within the organisation?With increasing pressure to show diversity in senior management, and the need to monitor talent pipelines and progress against diversity targets, more and more organisations are asking these questions.What categories of diversity data should employers collect?Employers will commonly frame their diversity questionnaires to monitor characteristics protected under the Equality Act 2010. Some employers will wish to go beyond that, while others will limit the data that they collect to characteristics that they consider most relevant to their organisation.GenderEmployers with 250 or more employees are required to report annually on their gender pay gap and will, therefore, as a minimum, need to monitor the gender of their employees. Although there is no specific enforcement mechanism, gender pay gap reports come under close public scrutiny and have led to increasing numbers of companies setting public gender targets. There has also been an increase in the numbers of companies with under 250 employees voluntarily reporting their gender pay gap.The gender pay gap reporting requirements currently require employers to report on "men" and "women". However, employers are increasingly recognising wider categories of gender identity and the importance of asking the right questions, as well as the negative impact that using inappropriate language can have. In monitoring gender identity, alongside "male" and "female", many employers also include "non-binary" and a "prefer not to say" option as well as the option for employees to describe their gender in their own words. Government guidance says that employees who do not identify as male or female (which would include non-binary employees) may be omitted from gender pay gap reporting.Transgender statusIn addition to monitoring employees' gender, employers frequently choose to monitor gender history or transgender status. While it is important to note that no employee should be compelled to share this information (and that sharing it without consent can constitute a criminal offence), companies are increasingly alive to the need to support their trans and non-binary communities, and to chart success in attracting and retaining trans and non-binary employees.If employers wish to monitor this data, the question "Is your gender identity different from the one you were assigned at birth?" may be used. Separately, if employers wish to monitor their intersex population, the question "Do you identify as intersex" can be used, noting that this should not be offered as a gender option (alongside female, male, and non-binary). Employees should be given the option "prefer not to say" in both cases.EthnicityThe latest position is that ethnicity pay reporting will not be made mandatory by the current government, but many employers are starting to report on a voluntary basis and government guidance is due to be published this summer to support those employers who are choosing to do so.One of the real challenges of ethnicity pay reporting is ensuring that an employer has complete data on the ethnicity of its workforce, which of course relies upon ethnicity monitoring. Employers also struggle to know what terminology and categories of ethnicity to use in any monitoring forms. The Chartered Institute of Personnel and Development recommends that employers are sensitive in the language and terminology used and invite input from staff and external experts. Many employers choose to use the categories of ethnicity used by the Office for National Statistics in the census (the most recent census having taken place in 2021). This has the advantage of also allowing an employer to accurately compare its ethnicity statistics against that of its local population. The census categorises ethnicity under six larger groupings (being "White British", "white other", "mixed/multiple ethnic groups", "Asian/Asian British", "Black/African/Caribbean/Black British" and "other ethnic group"), which is then broken down into 18 further sub-categories. In order to gain the most accurate picture it is likely to be preferable to use the 18 sub-categories (and larger employers seem to be taking this approach). Using a larger number of narrow categories in smaller organisations, however, risks employees being identifiable from the data collected. As with other data categories, it is also advisable to give employees the opportunity to use their own preferred terminology to describe their ethnicity.DisabilityThe government recently consulted on the possibility of introducing disability reporting. If a new disability reporting regime is introduced (on a voluntary or compulsory basis), it would have to involve the introduction of a standardised approach to collecting information about whether employees have a "disability". It is not obvious how to frame the right question or questions for the monitoring form, and employers wishing to monitor the disability profile of their workforce will need to give careful thought to the underlying purpose of collecting the data before deciding whether to focus on the legal definition of disability, the need for support, a diagnosis or self-identification of neurodiversity or a combination of these.(2)Religion and beliefThe Equality Act protects not just religious beliefs, but also other strongly held philosophical beliefs as well as a lack of religion or belief. If monitoring religion and belief an employer should consider why it wishes to do so, and if it wishes only to monitor whether employees adhere to particular recognised religious beliefs (or none) or to also capture other wider strongly held beliefs which may be protected under the Equality Act. If an employer wishes to capture a wider category of data then the employee will need to be able to self-describe their religion or strongly held belief, which may make the information less useful in terms of statistical analysis.Employers in Northern Ireland must:register with the Equality Commission if they have 11 or more employees who work 16 hours or more per week;monitor the community background of their workforce;submit an annual monitoring return containing this information;review the composition of their workforce at least once every three years to determine whether members of the Protestant and Roman Catholic communities are enjoying fair participation in employment; andtake affirmative action, where reasonable and appropriate, if such fair participation is not being secured.Sexual orientationAs with other categories of data, terminology to describe sexual orientation can vary and not everyone will identify in the same way. Stonewall in its Do Ask Do Tell Guide recommends using the following categories "bi"; "gay man", "gay woman/lesbian" (recognising that some women refer to themselves as gay women), "heterosexual/straight" as well as having the option "prefer not to say" or allowing individuals to self-describe using another term. Employers may also choose to include terms such as "pansexual", "asexual" and "aromantic". Inclusion of a wider range of categories can help employers to identify the proportion of their LGBT+ workforce in a more granular way and, therefore, focus on minority groups within the community.Monitoring surveys may also include follow-up questions asking employees about how open they are about their sexual orientation. This can be helpful in allowing an employer to analyse how comfortable employees feel to be open in the workplace and how inclusive a workplace it really is. Such a question might ask whether an employee is open about their sexual orientation with colleagues, with their manager and/or at work generally.Stonewall guidance also emphasises the importance of distinguishing between gender and sexual orientation.AgeMonitoring the age profile of the workforce allows an employer to identify how successful it is at attracting and promoting employees from different age categories. There are no set age bands that employers are required to use although the EHRC Code of Practice does make recommendations in this regard. In particular, it recommends that the age bands are narrower at the top and bottom of the age spectrum where age discrimination may be more likely to be prevalent.Social mobilityAlthough not a protected characteristic under the Equality Act, many employers are increasingly choosing to also monitor the socio-economic backgrounds of their workforce. The Social Mobility Commission recommends that employers ask three key questions to assess the socio-economic diversity of its workforce:"What was the occupation of your main household earner when you were aged 14?" (with answer categories to choose from);"Which type of school did you attend for the most time between ages 11 and 16" (with answer categories to choose from); and"If you finished school after 1980, were you eligible for free school meals at any point during your school years?" (with answer categories to choose from).The Social Mobility Commission also suggests an optional fourth question for graduate recruits to identify whether they are the first person in their family to attend university.OutlookEmployers are also turning their minds to new diversity information. For instance, the last few years have seen an increase in the numbers of tribunal claims brought in relation to the menopause, as well as a government inquiry which considered whether menopause should be a protected characteristic. Should employers now consider monitoring how many employees are impacted by the menopause? Similarly, with the position of carers also under the spotlight, should employers consider monitoring care-giving responsibilities more broadly amongst their workforce? In future, other categories of information may be considered – for example, information about whether employees were in the care system as children.Data protection, anonymisation and lawful useMuch of the data collected as part of an equality monitoring exercise will constitute special category data for the purposes of data protection legislation. Processing of special category data is subject to more stringent rules than other forms of personal data. Under the Data Protection Act 1998, consent was generally used as the legal basis for processing this data, although there were anxieties as to whether such consent could be seen as freely given, due to the power imbalance between employer and employee. Under Schedule 1(8) Data Protection Act 2018, an alternative legal basis was introduced: specified categories of personal data (namely that relating to racial or ethnic origin, religious or philosophical beliefs, data concerning health, and data concerning sexual orientation) can be processed for the purpose of identifying and keeping under review the existence or absence of equality of opportunity or treatment between groups of people specified in relation to the particular categories, with a view to enabling equality to be promoted or maintained.Employers in the United Kingdom may therefore rely on Schedule 1(8) Data Protection Act 2018 to justify special data collection for diversity and inclusion purposes. However, participation in any diversity monitoring exercise should remain voluntary (and in any case data subjects have the right to opt out). Importantly, these provisions cannot be relied upon if the data will be used by an employer to take "measures or decisions" with respect to a particular data subject. It is also worth noting that Schedule 1(8) applies in the United Kingdom only, meaning it will often still be necessary to obtain explicit consent if conducting such exercises in the European Union.In order to satisfy general data protection obligations the employer must notify employees why they are collecting the information, how the information will be used and to whom the information will be disclosed. This is usually done by way of a data privacy notice. This approach is also in line with the EHRC Code of Practice which states that monitoring will be more effective if workers or job applicants feel comfortable with sharing personal information. This is more likely to be the case if the employer explains the purpose of the monitoring and if they believe that the employer is using the information because they value diversity in their workforce and want to use the information in a positive way.Guidance from the Information Commissioner's Office states that employers should use information that identifies individual workers only where this is necessary. Where practicable, they should keep the information collected in an anonymised form. However, this may be difficult to achieve if datasets are small and truly anonymised data may be of little practical use for understanding the extent of any potential discrimination and for monitoring the progression and promotion of employees following recruitment. Employers should therefore consider:how they will use the data;what anonymisation measures might be compatible with their purposes; andwhether it is necessary for them to store information in an identifiable way.The approach and rationale should be recorded in a data protection impact assessment (which should be completed anyway if special data is being monitored).It should also be noted that using Schedule 1(8) may limit how the data can be used. For example, in order to address perceived inequalities that come to light as part of an equality monitoring process, employers may wish to take positive action. Positive action is lawful (in limited circumstances) under the Equality Act;(3) however, selecting employees for mentorship schemes, leadership programmes or other positive action initiatives could potentially constitute "measures or decisions" meaning that employers cannot necessarily make use of equality monitoring information for this purpose.Employers should also be mindful of the particular risks attached to storing information about employees' gender history and transgender status. The Gender Recognition Act 2005 contains a provision which makes it a strict liability criminal offence to disclose information obtained in an official capacity (eg, through employment) which reveals that an individual has a gender recognition certificate (recording a legal change to their gender). This can pose complications for employers who may retain documents showing the previous gender and/or name of an employee who transitions during employment, or who provided an identification document with a gender marker which does not match their presentation at work. Employers should therefore ensure they make careful provision for the storage of such documents.When should employers carry out diversity monitoring?The EHRC Code of Practice recommends that employers should monitor the key areas of the employment relationship, including:recruitment and promotion;pay and remuneration;training;appraisals;grievances;disciplinary action;dismissals; andother reasons for leaving.Employers commonly ask applicants and workers to complete diversity monitoring questionnaires as part of the recruitment process and at regular intervals throughout the employment relationship (often annually) in order to obtain a regular and up-to-date snapshot of the organisation and to monitor progress against diversity targets.If undertaking monitoring at the recruitment stage, it is particularly important that the monitoring process is separated from the application process (eg, the monitoring form could be sent out by email on receipt of a completed application form) to ensure that the equality information does not influence the recruitment process and give rise to potential discrimination claims.Adopting global approach to diversity monitoringMany international employers will want to take a global approach to diversity monitoring, in order to take a consistent approach and be able to monitor progress against diversity targets internationally. However, as with many areas of employment law, it is difficult to adopt a one size fits all international approach to diversity monitoring.At the far end of the spectrum, diversity monitoring is strictly prohibited in a limited number of countries, and questions around employees' protected characteristics can only be asked for a very limited number of specific reasons. In other countries, including France and Germany, while diversity monitoring is potentially lawful, it is extremely uncommon and counter cultural. In these countries, there is a strict distinction drawn between a person's personal and their professional lives and therefore any examination into a person's personal life by the employer is likely to give rise to suspicion and potential allegations of discrimination.A further challenge is the differing cultural approaches to certain protected characteristics. For example, while Germany legally recognises a third gender category of "divers" (the German translation of "diverse", which captures all non-binary genders) in countries such as the United Arab Emirates or Indonesia, the only recognised categories would be male and female. In some countries, even seeking to monitor gender history and/or sexual orientation could be offensive to employees and could even create legal risk for the employer.Similarly, different countries are likely to recognise different ethnic groups. If monitoring the ethnicity of the workforce, using UK categorisations on a global basis may well fail to identify the ethnic diversity issues in other countries.CommentDiversity monitoring has become increasingly complex as more and more types of diversity are recognised while employers have become increasingly aware of the negative impact that using inappropriate terminology can have. Employers are right to be thoughtful about the questions they ask and the language they use. It is possible, however, to collect diversity information and to use it for monitoring purposes, provided employees are not compelled to share the information and the correct data protection safeguards are in place.For further information on this topic please contact Anna Bond, Hannah Price or Tom Ford at Lewis SIlkin by telephone (+44 20 7074 8000) or email ([email protected], [email protected] or [email protected]). The Lewis Silkin website can be accessed at www.lewissilkin.com.Endnotes(1) Further information is available here.(2) Further information is available here.(3) Further information is available here.